(CNN) -- Germany announced Sunday it has agreed to lend 100 million euros ($144 million) to the rebels in Libya for "civilian and humanitarian purposes" despite staying out of NATO's bombing campaign against Libyan government forces.

Germany had previously announced a loan of $10 million (7 million euros) for humanitarian aid to the Transitional National Council, the rebel movement that is battling to unseat longtime Libyan strongman Moammar Gadhafi.

"Because of Colonel Gadhafi's war against his own people, the situation in Libya is very difficult," German Foreign Minister Guido Westerwelle said in a statement announcing the loan. "There is a major lack of funds to build infrastructure, as well as a shortage of needed goods, ranging from medical supplies to food."

Germany has not participated in the NATO-led military effort in Libya and abstained from the U.N. Security Council vote that authorized military action to protect civilians from Gadhafi's forces. But German Chancellor Angela Merkel said in June that her country shares the hope "that this NATO mission is successful."

Merkel also said Germany was supporting the NATO mission by providing increased resources to the U.S.-led mission in Afghanistan, freeing other nations to contribute to the Libyan campaign.

Germany has recognized the rebels as the legitimate representative of the Libyan people and established a liaison office with the opposition in Benghazi in May.

Berlin indicated Sunday that the loan will eventually be repaid by the Transitional National Council, using frozen assets from the Gadhafi regime. The statement indicated the reimbursement would happen "when the U.N. Security Council unfreezes the assets for a legitimate Libyan government."

By agreeing to the loan, Germany added itself to a growing number of nations, including Turkey and Qatar, that have announced plans to hand over millions of dollars in frozen Gadhafi assets to the rebel council in Benghazi.

In an interview with CNN last week, the finance minister for the internationally isolated Libyan government in Tripoli warned that the proposed reallocation of frozen funds would violate international law.

"The international monetary system cannot withstand action in this manner," said Abdulhafid Zlitni. "If you are freezing, through United Nations Security Council action, funds for any country, then you can't confiscate it. There are legal obligations of the banks."

Also on Sunday, rebel forces fought to hold on to Qawalish, a key Libyan village along a major north-south route. Rebel fighter Talha Jwaili told CNN that Gadhafi forces advanced from nearby Al-Asaba using heavy machinery. The rebels called in a large rebel force from Zintan, a city 25 miles (40 kilometers) away, and "managed to repel the Gadhafi forces after a fierce fight that lasted almost four hours," Jwaili said.

One person died in the fighting, Jwaili said -- his 16-year-old cousin, Youssef Jwaili, son of the Zintan military commander. Several others were injured, Jwaili said.

State TV, meanwhile, offered a different version of events. It reported "armed gangs and the colonialist crusader alliance" attacked a march of Libyan tribes at the entrance of Qawalish. It broadcast video of a convoy of civilian vehicles with passengers waving green government flags. It also showed video of people being treated at a hospital.

In a speech last week, Gadhafi called on his supporters to march -- unarmed -- to reclaim rebel-controlled cities and towns.

"A million should march to Benghazi and liberate it from the traitors without any weapons," the strongman said. "Even without weapons, we can cleanse the western mountains by the march of men and women."

CNN's Ivan Watson in Tripoli, Kareem Khadder in Tunisia and Frederik Pleitgen in Cairo contributed to this report.